1 Due diligence: verifying the Chinese company
Make sure potential Chinese manufacturers and business partners have been thoroughly vetted before working with them. The first thing you want to ensure after you have finished with your IP registrations is if the Chinese manufacturer is able to meet all of your manufacturing requirements, including quality, cost, and time to market. Is the manufacturer a trustworthy and reliable partner? Due diligence can assist you in determining the risks that your company faces.
Due diligence may include checking the Chinese company’s licences, legal representatives, credit history, and corporate structure, as well as any history of IP infringement, litigation, or administrative penalties.
It is critical to begin investigating a Chinese manufacturer as soon as possible to avoid wasting time and money on transactions that will ultimately fail.
2 Take advantage of contracts that are adapted to China
A contract and intellectual property protection in China is far more valuable than you might think. If a written agreement exists, intellectual property theft is less likely. Contracts written specifically for China must be used, not adapted from elsewhere, to have a stronger case in Chinese courts. A Chinese court or arbitration must be included in the agreement.
In addition to legal protection, because you have taken the time to draft contracts adapted to China, a Chinese manufacturer will also be less likely to steal or copy your intellectual property.
To prevent a Chinese manufacturer from competing with you, use basic agreements like NNN agreements tailored for China. Tooling protection agreements tailored to China’s needs can and should be used to ensure that the tooling you’ve built isn’t used to make products for others. You don’t want the Chinese firm to copy your tooling and use it to make their own products.
You’ll need an OEM development agreement with a Chinese manufacturer to make your affiliation with your manufacturer clear. You should seek to protect your IP rights when you draft your China manufacturing agreement.
3 Identify the Chinese company and make sure that the wrong person does not sign the contracts
To avoid problems later, you should choose a well-known Chinese manufacturer. Many international companies, especially small businesses lacking experience, purchase from trading companies unrelated to the plant’s owner. Despite this, many of these trade companies claim to be a”manufacturer”, as they know that is what the foreign companies are looking for.
If a defect in the goods is discovered, the buyer in most cases only is only able to sue the contracting party and not the actual manufacturer. What then if the manufacturer’s Hong Kong or Taiwan holding company is the contracting party?
You want to verify the Chinese companies and business owners. Why is this an important step? You do not want to end up signing a contract with what we in Chinese call a “suitcase company” or a fake company.
Verify that the entity you’re dealing with isn’t a shell company with few or no assets before making any payments. The parent company of a contracting party that is a Chinese manufacturer’s subsidiary may try to sign the agreement.
A company’s Chinese name may be translated into English in various ways in China. Thus, when signing a contract in China, make sure to include the company’s Chinese legal name, English name, and business registration number.
4 Protect your intellectual property (IP) in China
It is important to have a clear IP strategy in China. China has a first-to-file system for when it comes to IP protection. Thus, to prevent IP theft it is critical to register your brand name and logo as a trademark in China as soon as possible. If you don’t take this step and neglect trademark protection, someone else may be able to use your trademark, prevent your product from leaving China, or take you to court in China as you are breaking the IP laws in China.
What about patent protection? By protecting your patents in China, you avoid copying your product and prevent someone else from registering a patent in China and then using that patent to prevent you from manufacturing it or leaving China’s ports. In China, you have three types of patents: invention patents, design patents and patents on utility models.
Is registration for the protection of intellectual property enough? The short answer is no. It is crucial to monitor the Chinese market after registering your intellectual property in China. If you detect counterfeit goods on e-commerce sites in China and can prove that you own the intellectual property, they will have to take down the products from the platforms.
Suppose your intellectual property rights have been infringed upon, and you report this. In that case, you can expect local authorities in China to raid factories, prosecute infringers, and seize goods before they leave the country.
You can register your registered IP at the China Customs authorities. They are instructed to prevent products that infringe on IP protected in China from being sent out of the country. You do not want products infringing on your brand to cross borders and be sent to other markets in the rest of the world.
Remember that you will need separate registrations for Taiwan, Hong Kong, Macau, and Mainland China if you need protection in these areas. Do also remember that the service and product categories in the trademark system in China are different from other countries. It is crucial to have updated categories translated from Chinese, and then pick the correct service and product classes. You want to protect your trademark rights in the correct product categories that you are doing business in the best possible way.
While some companies might provide a list of service and product types to choose from, be aware that these trademark classes might not be updated. Make sure you get necessarily help to ensure you are protected in the updated product and service classes, to prevent other companies from registering your brand in these categories.
Do you need any legal help in China?
If you need help protecting your trademarks, copyright and patents and other legal help in China, please contact us here or send an email to firstname.lastname@example.org. We also offer background checks of Chinese companies, verifications of NDAs and contracts in China etc.